Comstock Inc.

Corrado De Gasperis, M.D.: : Morning everyone, this is Corrado De Gasperis and welcome to our quarterly Zoom call. Corrado De Gasperis, M.D.: : I'll provide a brief summary of the information included in our press release from this morning and from our quarterly report on Form 10-Q that we filed last night. Corrado De Gasperis, M.D.: : Including our progress on our recent breakthroughs in the lithium ion battery recycling processes Corrado De Gasperis, M.D.: : here in Nevada, our large scale industrial hemp processing facility in Iowa, and our mercury remediation business in the Philippines. I'll also provide updates on revenue projections and other corporate items, including one additional upcoming transaction. I know there's a lot to cover, and I'm really looking forward to the Q&A, so I'll try to be brief in the prepared remarks. If you don't have a copy of today's press release, you'll find a copy on our website at www.comstockmining.com by just clicking on the Press Release tab on the main menu bar. Our Form 10-Q is also available as of last night via EDGAR on www.sec.gov. Please let me remind you that we'll make forward-looking statements on this call, including our acquisition, construction, deployment, and revenue plans for the next three years. Any statements relating to matters that are not historical facts may constitute forward-looking statements. Our statements are based on current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in previous reports filed by the company with the SEC and in this morning's press release and all forward statements made during this call are subject to those same risks and uncertainties that we can't identify. Once we complete the prepared remarks, Zach Spencer, who is here with me, will direct all questions zooming in on us and I'll happily answer them. If you're not using Zoom, you can follow up with us after the call directly or via our website with any additional questions. In just six short months, we've seen a dramatic leap in our balance sheet where our net assets have more than doubled from just 33 million to now over 70 million. while eliminating all of our debt. We have made strategic, secured investments in MCU, Linoco, and LP Biosciences, all of which are actively ramping up production plans with MCU in the Philippines this year, Linoco in Q2 of next year, LP Bio in Q3 of next year. We've also advanced secured loans to Plainsight Innovations, a breakthrough extraction technology company specializing in cellulosic products, including biofuels, and also working directly for us on a lithium extraction solution at Linoco. All of these investments are secured, high yielding, and with unique IP that we are commercializing into extraordinarily high revenue growth models and throughput generators for us. We have also invested in a material science-based quantum technology for our mining batteries and carbon capture lines of businesses that I'll expand on a little bit more in just a few minutes. As I mentioned, our assets increased by almost $40 million, driven by four factors. First, an increase of $18 million in our investments, driven by Genmat, about $12 million, and Linoco, $6 million. Secondly, an increase of about $5.5 million in our secured Jose Aguto, notes receivables, including an almost 2 million increase in the senior secured note that we have with tonal gold. Jose Aguto, that's due this upcoming March and another million increase in the secured loan, as I just mentioned, to plain sight innovations. Jose Aguto, As a side note, the tonal note pays us cash interest of nearly $70,000 a month and they are current on all their payments. Third, we have an almost $8 million increase in what's shown on the balance sheet as a derivative asset. That's tied to the shares that we've contributed to Lineco and Genmat. This is economic in that we retain any and all of the appreciation in the value of those shares above our commitments. And we expect those amounts that will be monetized, excuse me, over the next two quarters to benefit Comstock. Fourth and last, we had an increase of about $6 million Just simply in the net extinguishment of all of our debt and the increase in our cash overall $40 million increase in our balance sheet. We believe each of these new investments has near term valuation potential of literally over a billion dollars, with most of them representing potential for multiples of that amount. shares outstanding today total 54.1 million, including all of the shares. issued to Renewable Process Solutions, RPS, Genmat, LP Biosciences, and Manacor. So those are complete and total for all those recently completed acquisitions. Again, these transactions have been structured safely with assets secured and tremendous accretive value and upside from incredibly large end markets, which I'll go over a little bit more in a minute. Just to wrap up on the corporate side, As you saw, our cash is over 5 million at June 30 with $25 million in non-current, non-core asset sales waiting to be closed. That includes our industrial and commercial non-mining lands, totaling over $13 million, all under contract. We expect those to close in the near future. And we have had a remarkable increase in interest in the Silver Springs Opportunity Fund, actually an almost unbelievable increase in interest with an increasing number of very large strategic investors fully engaged with the interest of investing it. The fund has fully leased its manufacturing capacity. It's fully operating the Silver Springs Regional Airport. And we get inquiries from new companies wanting to come into Northern Nevada and Silver Springs on an almost weekly basis. In fact, I have a call right after this one with an especially large company looking to do that. The funds, recent issuances, capital raises, if you will, are being valued at $1.80 a share. That puts the $335,000 investment that we have on our balance sheet at over $12 million today. So even though we've got $40 million increase in our assets, we have almost $11 to $12 million unrecorded asset in terms of fair value relating to our Silver Springs investment. If you put the value comps against that, you'd be looking at closer to $3 to $6 a share, which would put that investment closer to $20 to $40 million Not $12 million and certainly not the 300,000 that's recorded on our balance sheet. We also hold well over 9 million shares of Tono stock. We also have 6.7 million of secured notes receivable from Tono that's due in less than seven months. So if you totaled those Tono securities that we're monetizing, it's about $8 million. So for us, $25 million of non-dilutive monetized cash flow coming into the business over the next 12 months. Before I close on the corporate update, I just have a couple of additional items. Last week, we learned that a very long standing, I would say frivolous lawsuit against us was not only definitively won and concluded, but that the judge awarded us and the county over a quarter of a million dollars in legal fee reimbursements, substantially all of which would go to us. This positively concludes the zoning discussions associated with our Dayton resource area. Of course, we haven't been sitting in our hands. In the meantime, our updated resource modeling on the Dayton is well underway. We will publish a series of interpretations and developments on this data as it becomes available. well before publishing the full technical report. The technical report will be under the new SK 1300 standards. It will be published this year. And we know there's tremendous value in the day in resource properties and that the technical report is really the most important next step for unlocking that value and validating that value to the market. We also understand that Tonal Gold has prioritized the completion of their technical reports for the Story County properties, all of which we either own or hold stakes in, in one form or another. They also appear to have made process changes that we deem productive towards accelerating the publication of their technical report, the completion of their financial audits, and ultimately upgrading their stock listing. From the activities we see, this all seems to be moving more forward at a much, much more diligent pace. Regarding MCU, we're fully set up in the Philippines with our mine camp, our employees, our management, and our operations. We have fully run and tested the operations and even expanded the equipment with two new grizzlies for proper separating and sizing of the sand and gravel materials that we're selling to our customers. We have shipped sand and gravel to our first two customers. We did, however, have a permit oversight in the Philippines that we have now corrected, reapplied for, and expect to get approval within the next week or two. So we can restart processing and selling those sand and gravels again, remediating the mercury, extracting the gold. Just as a step back, we have and continue to have all of the permitting that we needed from the Department of Environmental and Natural Resources in the Philippines. But apparently we were required to have this additional permit solely for the purposes of the mercury containment relating to the sand and gravel process. and caused us, frankly, a very disappointing delay. During the past five weeks, though, the team has expanded the equipment. We built the two new Grizzlies. We've tested them. Everything's ready and fully operating, capable to go. We've expanded and finished off our mercury storage facilities. So we're very much looking forward to just resuming the operations there. Everything's in place. Our operating expenses there are variable. very low, unbelievably low. So we love the potential of this business and we very much look forward to the process getting up and running on a full scale. There's no other negatives that we are aware of in terms of how that system operates and what we're looking forward to. On a much bigger note, our transformational efforts have quickened during the first half of this year. We are affecting a literal green shift in our operating businesses. Our team is solely focused on the activities that enable rapid, and I'm gonna say exponential revenue gains in these huge end markets that we're addressing. We believe that just our existing platform today, as I just recently mentioned, is already worth many multiples of our half a billion dollar target, just based on the comparative valuations It would exceed billions just for similar lines of businesses that are publicly out there and capitalized in the market. I'm going to provide a quick overview on the three, Linoco, RPS, and LP Biosciences. We recently filed, as we previously disclosed, for the main Linoco permit application for our state-of-the-art lithium ion battery recycling facility that now reflects 100,000 ton per annum production profile for just the first plant in this business. This is literally a 5X increase from what we had originally provided guidance on. And I'm happy to explain that now we're in the Q&A. Lineco's new processes will commence upon the approval of that permit that we filed, which is anticipated before the end of this year. And we anticipate the completion and startup John Kane- arrival of equipment coming November, December, January, February commissioning in. John Kane- March, April startup in that second quarter, almost all of our equipment has already been ordered and we are moving very, very fast here. John Kane- Once complete, as I mentioned the facility expected to scale up to its initial main plate now exceeding 100,000 tons per year of lithium ion batteries over a period of the first three years. with annualized revenues exceeding half a billion per year during the third full year of operation. What's remarkable here is that these sales only represent black mass production and black mass sales. Those sales will be enhanced with downstream mineral and cathode production tremendously. Again, to be clear, this guidance, because of the expanded footprint of the plant, is only for black mass. Rene Valladares- When it goes capacity breakthroughs are a direct result of our recent acquisition of the engineering procurement and construction company renewable process solutions or RPS and its founder, Mr Raul Babili. Rene Valladares- Raul, who is now Comstock's chief process engineer company Y has designed and built. 21 advanced renewable fuels production facilities just in the last 15 years. And RPS has provided these engineering and commissioning services for other renewable metals and renewable fuel industries. A tremendous amount of capability here, a tremendous machine that we've added to the network. I don't believe anyone can have a true appreciation of what RPS's impact has been already to our system. It brings us an extraordinary competitive advantage just for Linoco. But right now, RPS is also bidding on LP Biosciences or a portion of LPO Biosciences engineering work as well, with indications that they could potentially save that project millions in CapEx on a faster cycle time and enhancing the overall value of both our and our partners' investment. We believe LP Bio will be the largest industrial hemp processor and producer of extracted oils in the United States. And like Lineco, the platform is designed to quadruple the capacity after its initial startup in the third quarter of 2022. The LP Bio facility alone is expected to scale up to its nameplate capacity exceeding 200,000 pounds per day of industrial hemp over its first three years. which will generate annualized revenues of over 400 million in the full third year of operation. And this is just based on the small oil fraction of the industrial hemp industry. The rest of the biomass that comes out of that process is comprised of cellulose with many known co-products that we are evaluating in our decarbonization efforts, including electrification applications that we believe are hiding in plain sight. So just to be clear, Lenico has an incredible revenue ramp up just with black mass, not minerals, not cathodes. LP Bio has an incredible ramp up on just one oil extraction from the industrial hand, not the other co-products that we would look ultimately to add to the MANA system. Speaking of plain sight, we also have been working closely this year with PSI, Plain Sight Innovations on a number of new technologies, including a novel process for immediately extracting lithium from black mass quickly and efficiently. There's more to come soon on that, but I just want to acknowledge today no one's able to do that. We believe we're going to be able to do that very soon. We're also working with existing processes for the efficient extraction of carbon from woody biomass with potential applications for producing anodes in batteries. As we started looking at becoming a cathode producer and the battery market, we explored these possibilities and were shocked at what PSI can actually do by taking waste wood biomass where the government's reporting over a billion tons of year is being generated and laid waste in the United States alone. PSI can convert it efficiently into ethanol, into biogasoline, into biodiesel, and many other products. Right now, they're helping us accelerate the lithium extraction from the black mass for Lineco, which will be another breakthrough. We believe that this global clean energy transaction transition, I'm sorry, this massive green shift, if you will, plus an escalating population growth is converging into a perfect storm of global demand, demand of which it's hard to exaggerate in these strategic materials without any meaningful corresponding capacity to meet even a fraction of this demand. So we're now building that capacity to meet these rapidly growing demands in each one of these businesses. This is literally positioning us for exponential growth and we're deploying these plants in our systems for that capacity now. Physical capacity in Nevada, physical capacity in Iowa. And over the next three years, towards over a billion dollars in revenue. But regardless of those plants, we're going to need more speed. And we strongly believe that speed has arrived in the form of a quantum computing advantage. We've invested in emerging quantum computing technology to accelerate the innovation of breakthroughs for new materials for use in these applications, meaning, excuse me, meaning specifically batteries, mining, decarbonization. We're partners with leaders in the industry, the top professionals, the top companies in the industry, as we position ourselves to continue the leadership in these material sciences. So just to wrap up, we're on a path to almost a billion dollars in revenue from just Linoco, MANA, MANA slash LPBIO, and MCU without any new additions. We plan on increasing this with PSI, likely this quarter, certainly this year, finishing the retrofits of two existing facilities in 2022. We're retrofitting two state-of-the-art existing facilities here and now with growth and revenue in 2022 and we're going to exceed our near-term half a billion dollar market value well ahead of schedule in fact we're extremely focused on only those items within the time frames that we published our money is where our mouth is as we've directly linked these performance objectives with our goal of delivering this first half billion which we are now obviously reassessing as each of these new growth businesses can exceed multiples of that amount. As we move to an exponential ESG-based growth track, we've already seen an incredible recognition just in our shareholder base with all of you, with all of you, but notably also BlackRock, Vanguard, and now Fidelity showing up in our top shareholders. This is just the beginning of our targeting effort. But regardless, our comp is structured so that the shareholders aren't rewarded, then neither are we. It's 100% performance-based. So with that, I'm going to ask Zach, our Zoom host, to stop here and please facilitate our questions.

Okay, thank you, Corrado. Our first question, and I know you spoke about this during your presentation, it's regarding MCU. Yeah. And we'd like to know how many units are operating and what does the P&L look like? And what is the plan to scale the MCU business?

Yes, thank you very much. So we have two units in existence. One is on the Comstock, which is our pilot unit operating 25 tons a day. It's not currently operating 25 tons a day. It has the capacity to operate at 25 tons a day. And then the first commercial unit, which was landed in the Philippines, which can do 150 tons per day. So the intention, first and foremost, is to have the MC unit fully operating in the Philippines, operating at or near the 150 ton capacity, I'm sorry, 150 ton per hour capacity, okay, and be selling all of the sand and gravel that comes from that system cash positively. That's objective number one. Objective number two, to extract any and all of the mercury that's resident in those materials and to extract the gold from the mercury in those materials. I mentioned in our last call that we started at the very, very low end of the river. It's the safest place to start. It's where we have the easiest and best access to the sand and gravel materials. It's also the area that has the least amount of mercury contamination. So while we were down for the last five weeks, we've been extending our scoping and sampling uh uh plans for the rest of the river to identify where the higher mercury and gold contents are and to expand out our mercury containment unit and to expand our actual system we put two new grizzlies on there so that we can sort the sand and gravels to different sizes as our customers are specifically asking us so the um the outlook for that is a revenue and a smaller level of profitability just from sand and gravel we believe that's an incredible de-risker of the model and then to start growing that revenue based on the mercury and gold contents that we're identifying at a relatively low grade of gold in those mercurys the potential is very high in terms of the amount of cash that we can generate monthly But it's going to be a two step process that send gravel up announced that it's back up and running announced that it's generated cash and then expand up the river. To the higher points of contamination now once we've done that second piece we're very, very keen we're very, very keen to talk about landing a second system. And then a third system, but it's going to be methodical. The Philippines is our essentially first commercial site. We're going to be cautious. I've had multiple conversations with our joint venture partner there. We could not be more aligned and we're fully committed to get that up and running. Beyond that, I can't exaggerate the number of projects and the inquiries that are out there from historic and or artisanal and small scale mining sites with mercury contamination. The conversations are abundant, but we have to walk before we can run. I'm disappointed in this mercury hiccup. DEEPLY DISAPPOINTED IN THE MERCURY HICCUP. WE'RE MAKING OPERATIONAL CHANGES WITH OUR JOINT VENTURE PARTNER THERE TO ADDRESS THE CIRCUMSTANCE SO IT DOESN'T HAPPEN AGAIN. BUT FINANCIALLY IN THE GRAND SCHEME OF THINGS, IT'S A VERY, VERY MINOR SETBACK IN THE SCOPE OF A MINING OPERATION AND WE'RE VERY EXCITED ABOUT MOVING IT FORWARD.